On this week's agenda for the US Senate is taxing Internet access. Until November 1, 2003, local and state governments had been prohibited from collecting such taxes. Ever since the original moratorium expired, the debate has been ongoing between groups supporting and opposing the continuation of the ban. As it stands now in the Senate, there are three competing proposals. President Bush reiterated on Monday his support for a permanent moratorium on Internet taxes as part of his agenda to ensure that every household in America has broadband access by 2007. Another proposal, sponsored by Sen. John McCain (R-AZ), would give Americans four more years of tax-free Internet access while allowing states to tax VoIP. Sen. Lamar Alexander (R-TN) is critical of both proposals, and wants to extend the break only through the end of 2005.
Many state and local governments are on Alexander's side. As one of his spokeswomen pointed out, they are concerned about the loss of tax revenue, especially if telephone usage migrates away from taxed land lines to (currently) untaxed VoIP. Such concerns are particularly acute in this time of budget squeezes. However, heavily taxing Internet access would put a damper on its growth. The House of Representatives approved a permanent ban on taxing Net access last September, so any legislation falling short of a complete ban passed by the Senate would have to go through a joint committee to iron out the differences.